By Simon Johnson. This post slightly updates the first few paragraphs of my most recent column on Bloomberg, which ran last week. For the rest of that column, use this link.
President Barack Obama is receiving congratulations for moving to the center on the tax agreement with Republicans.
Both sides think they got something: Democrats feel this will nudge unemployment below 8.5 percent in 2012, helping the president get reelected; Republicans achieved longstanding goals on measures such as the estate tax and think they will get most of the credit for an economic recovery that’s already under way.
The truth is, the deal moved us closer to a fiscal crisis, just as the euro zone now is experiencing.
Who will emerge on top in the U.S. version is harder to predict; at the moment, Republicans have the edge. But it’s not clear even they will be happy with what they wished for — an opportunity to enact massive federal government spending cuts.
To read the rest of this column, please click here. Alternatively, you can use the full address: http://www.bloomberg.com/news/2010-12-23/tax-cutters-set-up-tomorrow-s-fiscal-crisis-commentary-by-simon-johnson.html